Concept #4 – Advisor Tips for RRSP Season

“By the way, are you aware that there is still a $1,625 tax credit available?”We suggest that every advisor should incorporate this question as part of their standard client presentation. If you ask your client this question, you are on your way to becoming more successful and to position yourself as a leading edge advisor.Here is how it works:

Advisor:

“Thanks for your RRSP deposit Ms. Jones, I will do up the paperwork, and your RRSP receipt will be in the mail shortly. By the way, are you aware that there is still a tax credit available?”

Client:

“What do you mean?”

Advisor:

“If you give me a cheque for $5,000 to purchase SaskWorks Venture Fund shares before March of this year, you will receive an additional $1,625 in tax savings on your current year’s tax return.”

Client:

“But I just gave you my RRSP contribution. I’m afraid I’m tapped out in terms of my ability to contribute more.”

Advisor:

“That’s all right. We don’t need new money to get you the tax credit. We can also switch something in your portfolio to SaskWorks Venture Fund Shares.” (maybe there is a GIC maturing, a mutual fund within which the deferred sales charge period has expired, or perhaps 10% free switch room on a fund?)

If the client has extra available cash, you have just increased your asset gathering by $5,000 per discussion. If the client has no extra money, you have come across as a leading edge advisor, saving $1,625 without requiring any new money.

There are only two things a taxpayer can do after December 31 each year to reduce taxes for the prior year.

Contribute to an RRSP within the 60 days following the calendar year end.

Invest in SaskWorks Venture Fund shares within the 60 days following the calendar year end. Even if the individual has “maxed out” the RRSP contribution, or has no earned income on which to make an RRSP contribution, they can still reduce taxes for the prior year by investing in SaskWorks Venture Fund shares held outside of an RRSP.

This concept works well for students who have just entered the workforce and have a tax liability, but who had no earned income the prior year, so they cannot contribute to an RRSP.

It also works for self-employed business owners, farmers and fishermen, who may have taxes payable this year but no earned income in the prior year due to losses.

The “No Cash Tax Credit” – qualify for tax credits with “old money” by rebalancing assets in existing portfolios.Even if an individual has no new money to purchase SaskWorks Venture Fund shares, they are still eligible for tax credits by switching existing assets to SaskWorks Venture Fund shares. The switch may be done in non-registered portfolios, and all types of registered accounts, including RRSPs, and Locked-in Retirement Accounts (LIRAs). [Special steps are required for rebalancing Registered Retirement Income Funds (RRIFs), Locked-in Registered Retirement Income Funds (LRIFs), and Life Income Funds (LIFs).]

Write Double TicketsTax credits from purchasing SaskWorks Venture Fund shares in the 60-day period following the calendar year end may be claimed in the current or prior year. If the individual has not purchased SaskWorks Venture Fund shares in the prior year, they can make a $10,000 purchase – $5,000 for each year. This can be done with new money or by way of an “old money” switch using existing RRSP assets.

Draw Tax-Free Cash from Locked-In PlansBecause of the locked-in nature of plans such as LIRAs, SaskWorks Venture Fund, with its 8-year legislated hold period, is often a suitable investments. Investors effectively can “draw” up to $1,625 tax-free per year out of these plans by switching $5,000 of “old money” to SaskWorks Venture Fund shares.

There Is No Age Restriction on SaskWorks Venture Fund purchases outside of an RRSP.A growing segment of the market purchasing SaskWorks Venture Fund encompasses people over the age of 71. While this may at first glance seem odd, remember that clients are used to coming to you with their annual RRSP deposit and getting their tax deduction receipt.Once clients turn 71, they can no longer contribute to an RRSP, however there is still one way to shelter pension and investment income from taxes: they can still purchase non-registered SaskWorks Venture Fund shares in an open (non-registered) account and receive their 32.5% tax credit.Of course you need to ensure that the speculative nature of SaskWorks Venture Fund shares is appropriate for their situation, but the annual purchase of $5,000 in CVF shares is often a small portion of the overall RRSP nest egg. To decrease risk even further, consider counterbalancing the investment in SaskWorks Venture Fund by investing the tax credit in a risk free security or GIC.

SaskWorks Venture Fund stands out as one of the most powerful tax avoidance tools available in Canada.

Investment in an LSIF is subject to certain restrictions on resale and redemption. An investment in an LSIF is speculative and may not be suitable for all investors. Income tax savings are only one aspect of an investment in an LSIF. The merits of the investment as a whole should be considered. LSIF shares are offered by prospectus only. Consult the applicable LSIF prospectus for full details of the offering.

Rewritten with permission, based on a series of original articles written by Allan Jacks, Vice-President, Sales, Crocus Investment Fund. Previously published in CAIFA Winnipeg IMPACT Magazine.

READ OUR PROSPECTUS > This offering is made only by prospectus. The prospectus contains important detailed information about the securities being offered. Copies of the prospectus may be obtained free of charge from your Investment Advisor or the agent, Industrial Alliance Securities Inc. (www.iavaleursmobilieres.ca). Investors should read the prospectus and consult an Investment Advisor before making an investment decision.